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Prescient investor Peter Schiff laments in the Wall Street Journal here that –

“As recession fears cause the nation to embrace greater state control of the economy and unimaginable federal deficits, one searches in vain for debate worthy of the moment. Where there should be an historic clash of ideas, there is only blind resignation and an amorphous queasiness that we are simply sweeping the slouching beast under the rug.” (Underscoring Forum’s.)

But don’t lose hope for a “debate worthy of the moment.”

The invaluable James Pethokoukis of Capital Commerce points us here to Larry Kudlow’s “Time for a Choice — Not an Echo”  - -

“In fact, the GOP has a great opportunity to challenge Obama’s Keynesian pump-priming by insisting there be a major tax-cut component in any new fiscal package. Republicans shouldn’t merely push for somewhat less government spending. They have to make a bold case that tax rates matter for economic growth and job creation. They must insist that any recovery package includes this key element. Shift the debate. Say clearly that a reenergized economy cannot occur without lower marginal tax rates.

In particular, the GOP position should include lower tax rates on large and small businesses. Right now the top federal tax rate for C-corps is 35 percent. Small businesses, which pay the individual rate, also are taxed at 35 percent. These rates should be 20 percent for both C-corps and S-corps (including LLCs). This would make a huge difference. It would be a boon for our global competitiveness, since companies in the U.S. (as well as Japan) are taxed way above the rates of other advanced countries. It also would attract job-creating investment flows to the U.S. at a time when capital is on strike in our financial markets and economy. And while businesses collect corporate taxes, it’s really consumers who pay the final cost.

Republicans also could promote a middle-class tax cut that would reduce the 28 percent and 25 percent brackets down to 15 percent. And of course, the GOP should work hard to maintain the Bush tax cuts on capital gains, dividends, inheritance, and top individual rates.”(Underscoring Forum’s.)

Readers should consider the entire Kudlow piece which also reminds us –

“If we had an economy without rich people we wouldn’t have much of an economy. That’s why lower tax rates to reward the economic activists — the most prominent capitalists — are so essential.”

And Nobel Laureate Robert E. Lucas Jr. argues here in the Wall Street Journal that “Bernanke Is the Best Stimulus Right Now |  A zero interest rate isn’t the last weapon in the Fed arsenal” –

“It entails no new government enterprises, no government equity positions in private enterprises, no price fixing or other controls on the operation of individual businesses, and no government role in the allocation of capital across different activities. These seem to me important virtues.”

Meanwhile what are the two governors’ fiscal plans in Annapolis and Richmond?
Early last month, we asked here “Should U. S. Taxpayers Bail Out Maryland and Virginia?” underscoring —

“. . .the regulatory leverage the Federal government will gain through bailouts as Doug Bandow points out in ‘The Obama Administration’s Regulatory Opportunity’ citing Timothy Carney’s DC Examiner column here. Says Bandow — ‘the massive bail-outs now flowing out of Washington will give the incoming Obama administration an opportunity to impose a regulatory agenda that otherwise would be impossible to promote.’”

More recently, the Heritage Foundation’s Brian Riedl gives us a quick history lesson on state bailouts here –

“Because states are so dependent on income tax revenues—which are volatile—common sense says to build rainy-day funds during booms to cushion the inevitable recessions. Instead, states keep responding to temporary revenue surges with new permanent spending programs. Between 1994 and 2001, states flush with new revenues shunned rainy-day funds and instead expanded their general fund budgets by 6.2 percent annually.

All booms eventually end, and these free-spend­ing states left themselves utterly unprepared for the 2002–2003 economic slowdown. Yet instead of suf­ficiently paring back their bloated budgets, the states demanded and received a $30 billion bailout from Washington in 2003. When government bails out irresponsible behavior, it only encourages more irresponsibility. And that is just what happened: After the 2003 bailout, states went right back to spending—with annual budget hikes averaging 7.2 percent over the next four years. Rainy-day funds were expanded, although not nearly by enough. Thus, another recession has brought another round of state bailout calls.

How will states learn to budget responsibly if they know they can keep returning to the federal ATM?”(Underscoring Forum’s.)

And the Reason Foundation’s Robert Poole explains in the Wall Street Journal  here why “Stimulus Shouldn’t Be an Excuse for Pork | The nation’s mayors have presented a revealing wish list to Washington” –

“And you thought infrastructure investment meant roads, bridges and schools. It is clear that any infrastructure stimulus money given to the country’s mayors will lead to thousands of tennis centers to nowhere. News alert for mayors: We are officially in a recession. American families have to get by with less, and so do American cities.
. . . . . . . . . .

“Right now the stock market is experiencing a flight to quality, as investors look for the best-run, most stable companies. Involving the private sector in infrastructure funding would induce a similar shift in our transportation investments.

Secretary of Transportation Mary Peters says there is over $400 billion in private capital available for high-priority U.S. infrastructure projects. That sum, if properly spent on the most-needed transportation projects, would transform our roads, transit systems and airports into a 21st century transportation network that would unleash the economy.”(Underscoring Forum’s.)

Where does this leave us with Federal bailouts of states and the ensuing loss of more fiscal discipline in Maryland and Virginia?  Local conservative networks should not only keep up a public drumbeat for lower taxes, less spending, and more business-friendly environments, but talk-up alternatives as well.

The principles of the Colorado-cradled Taxpayer Bill of Rights (TABOR) don’t need legislation or constitutional amendments for right-minded legislators to follow them. The Maryland and Virginia General Assembly Republican Caucuses could simply agree to abide by the guidelines of TABOR by not voting for any increase in their state’s budgets that exceeds growth in CPI (inflation) and population.

County school-board expenditures should be on line, and proposed school-board contracts with teachers unions should be available on line for public viewing before they are approved.

Maryland and Virginia mega-counties and cities, jurisdictions (e.g., Loudoun, Fairfax, Montgomery), whose budgets approach those of small states, need active, independent local citizen associations that track and analyze spending, and prevent government encroachments on small property owners. Here is the mega-county taxpayer-association model put together by the Fairfax [Virginia]County Taxpayers Alliance.

If some of our otherwise-friendly legislators seem like deer in headlights during these turbulent times, local conservative voices have a duty to help put them right again.  Of course we all know the alternatives to mindless growth in state and local spending. These range from permanent state and local regulatory watchdogs, moving the civil-service to a business model, application of TABOR principles, privatization, all the way to transparency from the General Assembly to the school board.

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UPDATE JANUARY 5! Larry Kudlow reports here “Team Obama Adds Business Tax Cuts”  — “However, as yet there is no Obama signal for the most powerful tax incentives that would slash the 35 percent top corporate rate to something around 20 percent. This should apply both to large C-corps and small-business S-corps. It would attract investment, improve future job creation, and relieve consumers who really shoulder the corporate tax costs. Additionally, full cash expensing for business investment write-offs would provide an even greater bang for the buck. So while the new tax-refund plan and faster depreciation are positives, they are still much weaker than a full-bore supply-side tax-rate reduction that could even morph into full-fledged corporate tax reform. Now we wait for a Republican response, which hopefully will be bold corporate tax reform as well as reduced individual tax rates (at least for the middle class).”

A FAITHFUL VIRGINIA READER EMAILS! “Republicans must play hardball on the bailout issue!  I still think that if McCain had opposed the bailouts, he would have gotten an incredible amount of support.  Mail to Congress I heard ran 20-1 against the bailouts, but no one listened and no one is listening still!  Didn’t I read somewhere that Obama was against missile defense systems?  How can anyone be against defense? This might also be a good time for Republicans to get on the school choice issue - think how much money could be saved at the local level, and there would be no more need for the Dept. of Education - huge tax savings!  I realize we don’t have the votes, but it would be a great organizing tool.  Obama is certainly choosing private school for his own children!”

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